“Exceptional Circumstances”- an escape from fixed costs.

The Ministry of Justice recently confirmed their intention to adopt Sir Rupert Jackson’s blueprint for fixed recoverable costs across the fast-track and for most money cases valued at up to ￡100,000. Whilst the final figures for the scheme have yet to be agreed the proposed level of costs included in Sir Rupert Jackson’s report may raise concerns for many Claimant solicitors.

Costs are currently fixed in personal injury for cases up to ￡25,000 and the proposed increase will significantly increase the number of cases limited to fixed costs.

With the prospect of fixed the costs regime being extended, firms may increasingly look to escape the fixed costs regime. Currently a claim can escape the limits of the fixed costs regime if there are “exceptional circumstances making it appropriate to do so” It is conceivable that a provision to escape the fixed costs regime comparable to “exceptional circumstances” will be included in the new rules and this seemed an opportune time to review the current position to assess how the courts have decided what claims are considered to involve “exceptional circumstances”.

Fixed costs were introduced in 2008 with what became known as predictive costs (now CPR Part II) and have since been extended by the Introduction of the Pre-Action Protocol for Low Value Personal Injury Claims. These provisions were intended to include a wide range of cases with only a small number of exceptions. There are only a small number of reported cases where the parties have been allowed to escape fixed costs and when reaching a decision the courts have typically focused on the rules' intention to provide certainty as to the level of costs to be paid.

This approach was highlighted by Briggs LJ in Sharp v Leeds CC [2017] 4 WLR 98 (CA) “the fixed costs regime inevitably contains swings and roundabouts, and lawyers who assist claimants by participating in it are accustomed to taking the?rough with the smooth, in pursuing legal business which is profitable overall.” He continued “The starting point is that the plain object and intent of the fixed costs regime in relation to claims of this kind is that, from the moment of entry into the Portal pursuant to the EL/ PL Protocol (and, for that matter, the RTA Protocol as well) recovery of the costs of pursuing or defending that claim at all subsequent stages is intended to be limited to the fixed rates of recoverable costs, subject only to a very small category of clearly stated exceptions.”

The current rules regarding fixed costs allow costs to be incurred outside limits of the Protocol fixed costs regime if they meet certain criteria. The first test is that the case must contain exceptional circumstances in line with CPR 45.29J (1)

“If it considers that there are exceptional circumstances making it appropriate to do so, the court will consider a claim for an amount of costs (excluding disbursements) which is greater than the fixed recoverable costs referred to in rules 45.29B to 45.29H.”

This principle of exceptionality has existed since predictive costs were introduced in 2008. During that time I have successfully recovered costs in excess of the fixed costs on a few occasions via negotiation however the court guidance on the issue remains fairly limited and there are few reported cases where costs are recovered outside the fixed costs regime

The question is therefore what is considered to be part of the "swings and roundabouts" of litigation and what is actually exceptional?

The courts have sought to define the phrase by the ordinary meaning of the words. In R v Kelly [2000] 1 QB 199?the Court of Appeal considered the statutory requirement to pass a life sentence “unless the court is of the opinion that there are exceptional circumstances relating to either offences or to the offender which justify it in not doing so”, Lord Bingham maintained that “We must construe “exceptional” as an ordinary, familiar English Objective, and not as a term of art. It describes a circumstance which is such as to form an exception, which is out of the ordinary course, or unusual, or special, or uncommon. To be exceptional need not be unique, or unprecedented, or very rare, but it cannot be routinely or normally encountered.” This approach has been adopted in a number of fixed costs cases.

If the ordinary definition of exceptional is adopted how do the courts consider what is out of the ordinary course and what cases should be used as a comparison?

The issue was addressed in Ferri v Gill [2019] EWCH 952 (QB) an Appeal of a first instance decision of Master McCloud. He determined that “Exceptionality should not be a low bar and it must be measured against the types of cases that are governed by section IIIA.” Mr Justice Stewart relied on the comments of Coulson LJ in Hislop v Perdi [2018] EWCA Civ 1721 that “it goes without saying that a test requiring exceptional circumstances is already a high one” and confirmed the types of cases that a claim should be compared against. He maintained that “it is clear that the basket of cases against which a case must demonstrate “exceptional circumstances” is the type of cases that has exited the portal and are subject to the Part IIIA regime. “ This therefore includes cases which have exited the portal.

If the standard set is a high bar requiring a strict approach what types of cases have the court considered in the past, what cases may be considered to satisfy the test of exceptional circumstances and how are the judgements made?

The value of the claim is one factor that will be considered however the courts have shown that a value in excess of the portal limit will not guarantee an escape from fixed costs, particularly in cases just over the threshold.

Quadar v Esure Services?Ltd. [2016] EWCA Civ 1109 related to a claim which had started in the portal but had exited due to a liability dispute.?Part 7 proceedings had been issued followed by allocation to the multi-track. The court held that the fixed costs regime should not apply and that the rule should be read as if the phrase “and for so long as the claim is not allocated to the multi-track” was inserted.??The court highlighted a number of issues to consider and interesting aspects of the observations include that “The RTA protocol was not designed for the resolution of large claims or complex disputes, a claim in excess of ￡25,000 would not automatically be considered to be exceptional.” This has proven to be an approach adopted by the court and a settlement value in excess of ￡25,000 will not guarantee costs in excess of the fixed costs regime.?

Hammond v SIG Plc [2019] EWHC B7 (Costs) related to an RTA involving collision between a cyclist and a lorry, liability was disputed and the claim settled before allocation for ￡36,500. This was not considered to be “exceptional circumstances”.?

In contrast, the case of Jackson v Barfoot Farms?(CC, 29 November 2017) a complex claim which settled for ￡350,000, was considered to be “exceptional”?

Complex litigation can result in an increased level of costs, the questions of whether a case could be considered exceptional due to the level of costs incurred in bringing the claim to a resolution was considered by Leveson LJ in?Costin v Merron?[2013] 3 Costs LR 391 [11] "the phrase ‘exceptional circumstances’ in the context of [CPR] 45.12 speaks for itself. It cannot possibly mean anything other than that, for reasons which make it appropriate to order the case to fall outside the fixed costs regime, exceptionally more money has had to be expended on the case by way of costs than would otherwise have been the case.” CPR 45.12 referred to is the pre-2013 regime, it is likely that CPR 45.29J would have been considered to have required the same test.

In Parsa v?DS Smith PLC (unreported) 8 September 2017 Birmingham County Court the court accepted that it was “a very unusual RTA case turning on issues of illegality and consent to risk” and “involved legal complexities” in addition to which “the Defendant’s conduct would justify an award of indemnity costs” but failed to consider the case satisfied the criteria for exceptional circumstances based on the criteria established in Costin v Merron because it did not require ‘exceptionally more money… by way of costs than would otherwise have been the case’.

The requirement for a direct causal link between the exceptional circumstances and extent of the costs incurred has been rejected by both Coulson LJ in Hislop v Perdi [2018] EWCA Civ 1721 and?in Ferris v Gill, the costs expended may be a factor taken into consideration by the court but is now unlikely to be considered a requisite factor.

Perhaps the most commonly sought factor is that the case itself contained unusual legal issues or facts. The spectrum of cases to be included within the “basket” for comparison is quite wide and the value of the claim does by no means set the standard for complexity. There are a number of relatively low value cases that involve complex or novel areas of law or challenging factual elements and each will ultimately be considered on its own merits . Carlon v Domino's Pizza (Birmigham CC 27/8/2010.) was a routine road traffic accident case involving a minor, the psychological report indicated that the Claimant’s anorexia may have been caused by the RTA and further investigations were undertaken.?District Judge Wyatt stated that “I have come to the view that the element of the possibility that there was a connection between her eating disorder or its exacerbation and this accident is and amounts to in itself exceptional circumstances. … [T]he possible connection to a severe eating disorder, particularly one that led to a prolonged period of inpatient treatment, was something that took this case well outside the normal range of orthopaedic and psychological consequences of a road accident that would be otherwise likely to fall within the fast track regime.”

The environment a claim is conducted in by the parties involved can assist or hinder the ability to conduct a claim efficiently and a difficult opposing party can dramatically increase the level of costs incurred in even the most straightforward claim. This has been recognised by the courts and the Defendant’s conduct will also be factor to be taken into consideration. This was highlighted in the case of?Udogaranya v Nwagw [2010] EWHC 90186 (Costs),?costs outside the fixed costs regime were allowed in a claim which Master Haworth described as “a case where the Defendant was giving the claimant the run-around.”

In Hislop v Perde [2018] EWCA Civ 1721 a 19 month delay in accepting the Claimant’s offer was not considered exceptional circumstances, although the judge commented that “an exceptional case of delay may provide the grounds for escaping the fixed costs regime however the Defendant’s acceptance of a Claimant’s Part 36 offer could not always be regarded as an exceptional circumstances”. He continued “Again what matters are the particular facts of each case.?A long delay without explanation may well be sufficient to trigger rule 45.29, a short delay with a reasonable explanation will not.”

So whilst every case will depend on its own circumstances, there are a number of factors that the court may take into consideration when considering “exceptional circumstances “ including legal and factual complexity, the value of the claim and the conduct of the Defendant.?

?